Reset on CEO search could cost Salinas Valley Memorial Hospital another three months

Salinas Valley Memorial Hospital could be without permanent top executive leadership during a critical period, as an advisory panel considers a "road map" for the hospital's future as a standalone organization.

According to Salinas Valley Memorial spokeswoman Adrienne Laurent, it could take up to three months to hire a chief executive officer after hospital officials announced earlier this week that the top two finalists for the position backed out. Laurent said that would allow time for the hospital's executive search consultant firm Witt/Kiefer to come up with a new slate of candidates for the job, and for the hospital's executive search committee to conduct interviews ahead of making an offer, though she said it could happen sooner. She said the search committee would consider the three additional candidates who were also interviewed for the position, but wanted more candidates to choose from.

In addition, Laurent said the search for a new, permanent chief financial officer would also be delayed.

Hospital officials had hoped to have a new CEO in place by the end of the year when the contracts for both interim CEO Lowell Johnson and interim CFO Bob Dvorak expire.

Laurent acknowledged the delay was unanticipated but suggested it doesn't represent a setback and merely shows how committed hospital officials are to finding the best possible candidate.

"I think it's fair to say this (delay) is not what the search committee or the board wanted," she said. "But (hospital officials are) intent on finding the right person, and will take the time to do so."

In a statement, board president Jim Gattis noted the importance of a new CEO in Salinas Valley Memorial's long-term success, and said hospital officials would "take the necessary time to undergo a thorough process so we can find someone who has the right vision and experience, and can agree to a financially responsible contract that is in line with other hospitals like ours."

The hospital's statement also suggested the executive recruitment "climate" is highly competitive, and recruitment experts have been reporting a high number of executive vacancies.

Meanwhile, Laurent said the board will decide how to proceed without a new CEO in place. The board, which will include two newly elected members, Victor Rey and Rafael Garcia, is set to hold its next regular meeting on Dec. 20.

Johnson is said to be open to staying on while the CEO search proceeds, but there is no word on whether Dvorak might remain. The former took over for longtime CEO Sam Downing in early 2011 amid a union backlash over cost-cutting efforts and questions about executive pay and benefits. The veteran hospital administrator was initially hired to work through the end of last year but agreed to a one-year extension as Salinas Valley Memorial was embarking on a lengthy review of potential partnership options. Hospital officials ultimately rejected a proposed merger with county-owned Natividad Medical Center, and set their sights on remaining an independent hospital.

The executive search committee of hospital officials — including the five-member board of directors and three top physicians — had chosen two finalists after interviews with five top candidates, and had hoped to begin an interview and introduction process with a broader array of hospital stakeholders before approving an offer to its top choice.

Current chief operating officer Jim Griffith was reportedly interviewed by the search committee, but Laurent would not confirm or deny that report, citing a promise made to the candidates that their identities would remain confidential.

Laurent said Witt/Kiefer's contract calls for producing viable candidates, and the firm's additional search efforts would not result in an additional cost.

At the same time, the 41-person advisory panel working with consultant Alvarez & Marsal on a plan for the hospital's future was set to meet Thursday — its third meeting in the past few months. The panel is seeking ways to continue righting its financial ship without a major influx of outside cash from a partner.

The panel of hospital officials, medical professionals, labor representatives, business and community leaders, and others, is set to meet several more times through February.

A hospital financial forecast suggested the operation would need to improve its bottom line by about $40 million if it's to survive on its own and be capable of paying for a major capital upgrade by 2030 to meet state seismic safety standards.

Laurent said the panel would likely have a series of recommendations for the hospital board after it finishes meeting.

The hospital reported total earnings of about $13.7 million through the end of October this year, a positive sign after consecutive fiscal years of multimillion-dollar losses.